In his rejoinder to Sachs, William Easterly (seemingly fully in agreement with Bruce Caldwell’s oft-repeated claim that Hayek’s thesis has no bearing on contemporary policy debates over the welfare state per se) suggests that Hayek’s thesis was intended to only have applicability to a system of wholesale state planning.4 In reply, Sachs rightly pointed to Hayek’s 1976 utterance that he deemed The Road to Serfdom to have much applicability to command planning and the redistributive Nordic-style welfare state alike.
Sachs notes that Hayek suggested “that high taxation would be a ‘road to serfdom,’ a threat to freedom itself” (Sachs 2006, 42). Similarly, Sachs maintains that “Hayek was wrong. In strong and vibrant democracies, a generous social welfare state is not a road to serfdom” (ibid.; emphasis added).
Unsurprisingly, Sachs’s reading of Hayek attracted much online commentary. For example, one leading authority on Hayek’s work insisted that Sachs had seriously misread “Hayek’s Road to Serfdom thesis” (Boettke 2006).
Our aim here, however, is not to evaluate whether Sachs and Easterly are correct per se in their claims and counterclaims about the growth performance (whether sterling or otherwise) of the Nordic social democracies. Instead, we argue that Sachs’s “welfare state” reading of Hayek’s thesis is accurate. Indeed, the Sachs-Easterly exchange is merely the latest spark on this particular issue to rise from the rather heated intellectual fire that Hayek’s book immediately lit upon its initial appearance in 1944 (see, e.g., Hansen  1947). Moreover, there is much clear evidence that Hayek himself had always intended his argument to apply with equal stringency against command planning and the welfare state alike (see, e.g., Hayek 1948,  1994, 1960, and  1994). Indeed, as we shall show, Hayek—during the 1940s and after—frequently argued that the logic supposedly set into play by any policy of persisting with the mixed economy, Keynesian demand management policy, and welfare state practices would lead to full-blown central planning. Importantly, Hayek frequently claimed that the “middle of the road” policies—pretty much the welfare state and demand management (Toye 2004)—adopted by the 1945–51 Labour Government in
aptly illustrated the veracity of his thesis in The Road to Serfdom." Britain
The hodgepodge of ill-assembled and often inconsistent ideals which under the name of the Welfare State has largely replaced socialism as the goal of the reformers needs very careful sorting out of its results are not to be very similar to those of full-fledged socialism. This is not to say that some of its aims are not both practicable and laudable. But there are many ways in which we can work toward the same goal, and in the present state of opinion there is some danger that our impatience for quick results may lead us to choose instruments which, though perhaps more efficient for achieving the particular ends, are not compatible with the preservation of a free society. The increasing tendency to rely on administrative coercion and discrimination where a modification of the general rules of law might, perhaps more slowly, achieve the same object, and to resort to direct state controls or to the creation of monopolistic institutions where judicious use of financial inducements might evoke spontaneous efforts, is still a powerful legacy of the socialist period which is likely to influence policy for a long time to come.